Mirror supplier Gentex Corporation said it boosted full display mirror unit shipments 89% year on year in 2019 to 739,000 units though fourth quarter revenue slipped 2% due to the General Motors strike and global light vehicle production fell 5%.
The supplier said its gross profit margin of 36.5% for the fourth quarter of 2019 was significantly higher than the strike-impacted company’s initial forecast of 35%-36%.
Gross profit margin was 37% for calendar year 2019 which included “70 basis points of incremental tariff headwinds when compared to 2018, and total tariff costs of approximately 100 basis points for the full year”, according to a company statement.
Full year earnings per share increased 2% to $1.66 from $1.62 in 2018.
Fourth quarter net sales fell 2% year on year to US$443.8m.
Gentex said a 6% production decline in Europe and a 10% production decline in the Japan/Korea market quarter on quarter, more than offset the modest improvement in the China market versus the fourth quarter of 2018.
“The fourth quarter has always been difficult to forecast because of inventory adjustments at our customers that often occur at year end, but in 2019 we were also estimating the impact that the [GM] strike would have on revenue and profitability for the quarter. With the exceptional growth rate of our full display mirror, General Motors has become one of our larger customers in 2019, which means we were disproportionately impacted by the strike,” said Gentex president and CEO, Steve Downing.
“In fact, if not for the 5% revenue impact of the strike, our out-performance versus the underlying vehicle production levels in the quarter was consistent with our full year out-performance of 7%.”
Full year 2019 sales increased 1% to $1.86bn compared to $1.83bn for 2018. The company’s initial sales forecast for 2019 was based on a global light vehicle production forecast which assumed an approximate growth rate of 1%, however, the actual global vehicle production rates for calendar year 2019 were down approximately 6%, therefore, the company’s claimed out-performance to market was 7% for calendar year 2019.
Calendar year 2019 gross margin was 37%, compared with 37.6% for 2018. The gross margin during 2019 was negatively impacted by approximately 70 basis points from tariffs versus 2018. Other factors that impacted the gross margin during the year included the company’s inability to leverage fixed overhead costs on the lower than expected sales levels and annual customer price reductions that were not fully offset by purchasing cost reductions.
“Considering the very challenging global light vehicle production markets, the strike, and the fact that we were still dealing with some of our own product related headwinds in 2019, our team has done an excellent job maintaining the gross margin profile of the company,” said Downing.
“All of our teams were focused on offsetting annual customer price reductions, addressing incremental tariff costs, and finding ways to minimise the impact of fixed overhead… If not for the incremental tariffs encountered in 2019, our gross margin would have been slightly better than 2018.”
Q4 2019 net income was $99.5m versus $106.3m in Q4 2018, primarily driven by the reduction in revenue as a result of the GM strike.
Full year net income was down 3% to $424.7m due to lower vehicle production levels, increases in tariffs and the strike.
Q4 earnings per share were $0.39, compared with $0.41 and full year EPS was $1.66, up 2% on 2018’s $1.62.
Auto-dimming mirror unit shipments increased 3% in the fourth quarter and also by 3% in full year 2019.
Q4 automotive net sales fell 2% to $433.8m and 1% to $1.81bn in calendar 2019.